* British PM May falls short of parliamentary majority
* Pound down 1.6 pct after dropping as much as 2 pct vs
* Movements in dollar, euro and yen limited, Comey taken in
* Broader market focus shifts to next week's Fed meeting
(Updates British election details)
By Shinichi Saoshiro
TOKYO, June 9 The pound fell sharply on Friday
after British Prime Minister Theresa May's Conservative Party
lost its parliamentary majority in a general election, throwing
the country's politics into turmoil and potentially disrupting
Sterling was down 1.6 percent at $1.2761 after sliding to as
low as $1.2693, down about 2 percent and the weakest
since April 18.
May faced calls to quit on Friday after her election gamble
to win a stronger mandate backfired, leaving no single party
with a clear claim to power just 10 days ahead of the start of
negotiations on Britain's divorce from the European Union.
For a graphic on the poll, see tmsnrt.rs/2q7tC48
But reactions in other major currencies such as the dollar,
euro and yen were limited, also having taken in stride testimony
by former FBI director James Comey, which was initially expected
to be the other big event of the week.
"Britain's exit from the European Union will continue
regardless of the political turmoil likely to be created by the
election results. Other currencies, like dollar/yen, are not
reacting much as it is a more domestic affair this time, unlike
last year's Brexit vote," said Koji Fukaya, president at FPG
Securities in Tokyo.
"The focus for the broader currency market will now shift
towards the Federal Reserve's policy meeting next week."
The Fed ends a two-day meeting on Wednesday. The central
bank is widely expected to hike interest rates and the focus is
on whether it would leave the door open for further monetary
tightening in the months to come.
The U.S. currency was up 0.2 percent at 110.210 yen.
The dollar index against a basket of major currencies was up
0.3 percent at 97.221.
The index had retreated to a seven-month trough of 96.511
midweek when caution ahead of Comey's testimony and the British
election drove U.S. yields to lowest levels since November. But
yields have since bounced from the lows as risk aversion ebbed.
Comey accused President Donald Trump of firing him to try to
undermine its investigation into possible collusion by his
campaign team with Russia's alleged efforts to influence the
2016 presidential election.
While this was the most eagerly anticipated U.S.
congressional hearing in years and was approached by investors
with caution, it did not offer fresh insight for the financial
markets. The Nasdaq managed to close at a record high on
Sterling fell earlier to a seven-week low below 140.00 yen
before clawing back to 140.69, down about 1.3 percent
on the day.
"There were many participants who wanted to take advantage
of the volatility resulting from a key event like the British
elections, which explains the pound's initial steep drop," said
Yukio Ishizuki, senior currency strategist at Daiwa Securities.
"The swings in the pound have not spilled over into other
currencies as the market was well hedged and prepared for a
variety of election scenarios."
The euro extended overnight losses and was 0.1 percent lower
at $1.1204. It had risen to a seven-month high of $1.1285
a week ago as the dollar retreated broadly on
weaker-than-expected U.S. employment numbers.
But the common currency was capped after the European
Central Bank on Thursday cut its forecasts for inflation and
said policymakers had not discussed scaling back its massive
The Australian dollar shed 0.2 percent to $0.7533
as the greenback firmed.
It edged away from a six-week peak of $0.7568 scaled on
Wednesday after data showed Australia's economy continued to
expand in the first quarter.
(Editing by Kim Coghill)